Here Comes Government Rationing

Published January 1, 2002

Opponents of government control of health care—among them economists, policy analysts, and health care practitioners—have often warned that government control inevitably means government rationing of care. They’ve pointed to Canada, Great Britain, and other countries where such rationing routinely takes place. In the U.S., single-payer state plans, Medicare, and Medicaid would appear to be particularly vulnerable to rationing, on the basis of political whim as well as turns in the economy.

During the economic ups of the 1990s, states added benefits to their Medicaid programs to care for low-income families. Now, because of a strained economy, tax receipts are down . . . and states are finding it necessary to break their promises and ration medical care as a way to balance their budgets.

Rationing Cuts a Wide Path

In a November 14, 2001 Wall Street Journal article titled “States Look to Ration Health Care,” Robert Gavin finds state health care costs are growing at their fastest rate in a decade: 9 percent a year. At the same time, states are struggling with budget shortfalls totaling an estimated $15 billion.

Gavin reports that if the nation’s unemployment rate rises to 6.5 percent—roughly a single point above what it is now—states may have to absorb nearly two million more people into Medicaid.

Some states are already beginning to reduce health care benefits. Oregon, for example, recently proposed reducing benefits for 90,000 low-income residents by adding cost-sharing co-payments in order to extend coverage to 40,000 others. Utah wants to cut benefits by about 3 percent.

Under current Medicaid rules, states are permitted to cut optional benefits, like prescription drugs. They may also exclude certain beneficiaries, like low-income adults without children. The law only requires that equal benefits must be provided to all participants in the program. States cannot, for example, cut prescription drug benefits for one group of beneficiaries without cutting benefits for all enrollees in the program.

Bring Back the Free Market

Commenting on the state of health care in the current economic environment, Representative Charlie Norwood (R-Georgia) had harsh words for a health care system run not by patients and providers, but by governments and other third-party payers. Addressing the October 20 annual meeting of the Georgia Society of Clinical Oncology, Norwood noted that “every provider, every patient, every hospital in the country is reeling from the same disease: health care rationing, stemming from both managed care and Medicare/Medicaid.”

Norwood encouraged the audience of cancer-care practitioners to support a return to private-sector health care.

“If you were strictly private sector,” Norwood noted, “your rates would reflect what you needed to run your practice, provide care, pay for your schooling, and make a profit.

“I’m sure each of you would be happy to sell chemotherapy drugs at cost, or not at all,” Norwood commented, addressing a practice currently under investigation by federal Medicare officials and Congress, “if you were taking in a reasonable charge for your direct services. But Medicare government bureaucrats have cut your treatment reimbursement to a level that you can’t stay in business. Your only option is to make your profit on the sale of chemotherapy drugs.”

Medical Savings Accounts, Norwood said, are among the solutions to health care providers’ predicament. MSAs provide “instantaneous reimbursement for services,” he explained, create the perfect wellness incentive, and help restore a market in health care.

“For the first time in decades, patients are going to be paying attention to your rates. Their health care expenses will once again be in their own hands. Charge a fair amount for your services,” Norwood urged.

For more information . . .

The full text of Robert Gavin’s Wall Street Journal article, “States Look to Ration Health Care,” is available to WSJ Online subscribers at